The ongoing slide of the Indian currency is poised to cause some major dents to Bangladesh’s garment exports, as the two neighbouring countries compete in the same segments globally.
The rupee slumped to a record low last week amid growing concerns over the health of the Indian economy.
Although both the Bangladeshi taka and the Indian rupee now have more or less the same denomination value against the dollar, the rupee’s downtrend suggests it is bound to get cheaper in the near future and in the process, divert Bangladesh’s orders to India.
Particularly affected will be Bangladesh’s exports to the US, where the South Asian neighbours enjoy a level-playing field but India has an edge due to its own cotton production.
“Even the confirmed orders will go to India if the rupee continues to decline this way,” said a former president of Bangladesh Garment Manufacturers and Exporters Association Abdus Salam Murshedy.
Over at the European Union, Bangladesh’s 12.5 per cent duty benefit under the relaxed Rules of Origin policy, too, is no longer looking to be a big advantage over India, said executive director of Centre for Policy Dialogue Mustafizur Rahman.David Hasanat, managing director of Viyellatex Group, one of the major garment exporters to the European market, however, thinks “India’s currency advantage would not last forever”. “Normalcy will return after a certain period — Bangladesh, in the end, would not be that big a loser,” he said.
But it is the country’s growing garment exports to India that would be the biggest casualty of rupee’s depreciation.
“The domestic garment makers there would now be able to cater to the orders at rates equal to, if not better than, Bangladesh’s,” Rahman said.
Murshedy, who is also the president of Exporters Association of Bangladesh, sought policy support from the government to maintain the high export growth to India, which started growing in stature after the neighbouring country extended a zero-duty benefit in November 2011.
In fiscal 2012-13, garment exports to India increased 36.70 per cent from the year before to $75.21 million, according to data from Export Promotion Bureau. — By arrangement with The Daily Star/ANN